Cooperating to insure our future

Cooperating to insure our future

FIS has been listening to its members who have felt increasingly frustrated by the lack of real support from the insurance industry, as appetite has become restricted and where cover is available it is universally increased and, in some circumstances, it has become uncommercial and very difficult to place.

In a survey conducted by FIS at the start of the summer it was identified that around 90% of members have experienced rising insurance costs over the past three years.  Further that, over half of the respondents had experienced difficulty in securing insurance and 60% of respondents believe that the price of insurance is now a problem to their business.  Key concerns raised through our research were a need to switch to aggregate cover in order to get any insurance at all and having to deal with onerous endorsements within Professional Indemnity Insurance that prohibited certain key tasks, curtailing those jobs that our membership could take on.

This cannot continue; in reaction to these findings and further dialogue with our members, FIS has reviewed the options and is planning further intervention including setting up a new facility to broker insurance for members.  The aim is to establish FIS Insurance Services (FIiNIS) as ‘cooperative’ insurance brokerage and risk management advisory service.  The brokerage will be run in partnership with Construction Shield and will support FIS in advising on and of providing insurance-related services.

Commenting on the announcement FIS CEO Iain McIlwee stated:

“We keep coming back to the realisation that there is a fundamental breakdown in the way that we are engaging with the insurance sector.  This needs to start with a clearer understanding of the risks, interrogating claims data and looking to support an ongoing improvement in quality and risk management.  This isn’t just about cheaper cover, but about transparency and a new and holistic approach to risk management that will help us support individual members and sectoral change. 

 Through this open brokerage approach, built around the FIS PPP Quality Framework, our aim is to establish a new relationship with the insurance sector, separating legacy from future works and targeting better provision built around the needs and risks of our sector.  By doing this as a co-operative we can share the upside back with those companies that are effectively managing the risks.

In time it is an aspiration to look at the potential to evolve this co-operative approach to the natural progression of becoming an insurance mutual – we are a vast industry and taking a position in our own risk makes a lot of sense.”

Over the next few months, FIS Insurance partner Construction Shield will be reaching out to members, helping to analyse the cover they have and vitally don’t have with a view to offering tailored and targeted packages exclusively to companies signed up to the FIS Ongoing Vetting Process.

James Reid, Chief Executive at Construction Shield said:

We are delighted to be in partnership with the FIS on this project to help re-address the balance between genuine risk management and risk transfer.  It is clear that the FIS leadership have heard and reacted to the voice of its membership and it is for the membership to now join together strategically to put the buyers of insurance in a stronger and more stable bargaining position in a hardening ‘traditional’ insurance market.  With genuine risk management, the championing of best practise and greater understanding of activities there is no reason why insurers and insureds alike cannot come to a commercial sensible compromise between the availability of cover and the cost of proper risk transfer.  We, like FIS, are excited to be able to build this meaningful project together for the benefit of its membership.

CIVC Forum guide offers advice on professional indemnity insurance

CIVC Forum guide offers advice on professional indemnity insurance

The CICV Forum has unveiled a new guide to the crucial and increasingly complex issue of professional indemnity insurance (PII).

The easy-to-understand downloadable document, produced by the Forum’s unique collaboration of trade associations, professional bodies, companies and individuals, outlines the state of the insurance market, the precautions firms should take and the pitfalls they face.

And it warns that over the last 18 months or so, a variety of reasons have seen the cost of PII increase hugely while businesses have often suffered reductions in the scope of cover.

The free guide, which will be invaluable in a febrile market, offers advice on subjects ranging from extending liability to contractual liability, the nature of PII cover, insurance limits, obligations under ancillary documents and risk management.

Alan Wilson, CICV Forum Chair and Managing Director of electrical trade association SELECT, said:

“PII is a necessary tool for protecting business owners who provide a service or give advice if a client claims a service is inadequate.

“Until the past few years, the construction insurance market has been soft, in that there has been plenty of capacity leading to broad coverage and premium reductions driven by competing insurers.

“The market has now become very hard with the consequence that premium rates have increased, cover has been restricted and, indeed, several insurers have left the market altogether.”

The guide explains that market attitudes have changed following a number of incidents, including:

  • A review of unprofitable insurance classes by Lloyds of London
  • Advances in the size and complexity of the design and construction process
  • Over-eating, or businesses taking on higher levels of risk
  • The effects of the Grenfell tragedy, and
  • A series of natural disasters globally.

Len Bunton, construction consultant and co-Chair of the Forum’s Pipeline and Commercial Sub-Group, said:

“The issue of PII appears to be a potentially massive problem for the industry. This guide therefore outlines the nature and likelihood of liability and looks at how businesses can manage their risks by identifying them, evaluating their impact and taking steps to control them.

“It offers advice on negotiating with insurers and stresses that full disclosure of risk is vital, despite the onus placed on underwriters by the Insurance Act of 2015 to ask the relevant questions of a business.

“Demonstrating that you have a solid risk management culture, robust financial resources and controls, as well as providing insurers with proof and documentation of risk mitigation, internal practices, cashflow and profit margins, will all help lower premiums.”

Formed in March 2020, the Forum is now made up of 29 leading trade associations, professional services bodies and companies.

Since its inception, it has maintained a steady supply of information and practical advice to the sector as well as carrying out surveys, hosting webinars and holding regular discussions with the Scottish Government.

The Forum’s most recent event was a political hustings in April, during which Scottish Parliamentary candidates from the five main political parties debated the major issues facing today’s construction industry.

  • Download the document here.

Business Management Toolkit

Access a range of resources to support your business

Cooperating to insure our future

Leading reform in insurance for construction

FIS has become acutely aware of the growing issues within our supply chain regarding requirement, availability, and escalating cost of insurance (particularly professional indemnity), but also overall concern regarding support for our sector from the insurance industry.  This has been widely reported across construction with the latest report from the Construction Leadership Council identifying that 55% of businesses responding had been unable to secure the level of cover that they wanted to buy.

FIS is exploring the possibility of developing a tailored, comprehensive, insurance solution aligned to the risk management principles identified in our FIS Product Process People Quality Framework that ultimately fairly prices risk and delivers value for money to our community.  Through this process FIS intends to challenge the market by interrogating claims history and policy wording with a view to supporting a more structured and informed dialogue, address some of the trust issues that have built up and ultimately look at how we best share risk with the insurance sector.

Insurance is the ultimate trust based sector – premiums go up when trust goes down.  Our remit from the Board is to challenge and, if necessary, disrupt and we are considering a number of potentially radical options, even the possibility of setting up a mutual insurance offering that ultimately would be owned by the industry.

We are not going to run before we can walk, but wanted to give you a bit of a heads up as to where this may go.  Key to supporting change is information – it is critical now that we build on the anecdotal information members have shared and use hard stats to challenge and, if necessary, to disrupt insurance provision for our sector.  So to this end please complete this short survey on insurance, even if you are perfectly happy with the support you are getting, we need a clear picture and the full range of views to understand scale and identify ground truths and ultimately support reform.

The survey is available here, should take no more than 5 minutes to complete and we are requesting responses by close of play on Thursday 27 May.

For more information on insurance, visit the FIS Business & Taxation Toolkit here

FIS Trends Survey shows cautious optimism

FIS Trends Survey shows cautious optimism

FIS latest quarterly trends survey shows that there is cautious optimism in the sector, but recovery is patchy.

The latest data gathered as part of the wider Construction Products Association quarterly trends survey shows that Overall 50% of respondents reported increased quarterly sales in Q1 2021, however workload remains constrained, with the balance reporting workloads slipping back on a quarterly basis.  The spread of the response is indicative of the patchy nature of recovery.  The market is, however becoming increasingly optimistic with a balance of 63% expecting increased sales in the next quarter and 26% anticipating this will convert into actual work.

Shortage is the watchword for 2021 in the finishes and interiors sector and this has manifested in inflation through the supply chain.  Over the past 12 months shortage in key materials hit the headlines (e.g. plaster and plasterboard) largely driven by COVID related production issues.  In 2021 whilst issues related to gypsum products has eased, more globalised issues related to steel, screws and fixings, timber and now polymeric products such as sealants are starting to drive allocation and extended lead times.  We have also seen shipping and transport costs impacted by Brexit, but this now seems to be easing.  Outside of these figures the rising cost of insurance and availability of cover has been raised as a concern.

FIS CEO, Iain McIlwee stated “I think if we knew 12 months ago we would expected to have seen far worse numbers, on the whole there are a lot of positives in there.  These figures are consistent with conversations we are having with members, there is work out there, but some sectors and regions are lighter than others and it is difficult to take a longer term view.  I take confidence from conversations with the Bank of England this week about long term investment patterns, but I am a little wary that the delays in work and decisions will leave a bit of an air bubble in the system and that cash, material and labour shortages will make things tricky for many in balancing things over the next 12 months”.

Iain McIlwee, FIS Chief Executive

Market Data

FIS members have access to a wealth of Market Data, from leading sources like the Construction Products Association and Barbour ABI. In addition, FIS also gathers data specifically related to the finishes and interiors sector.

Safety Alert: On site storage

Safety Alert: On site storage

If loading out a site and in wake of shortages and potentially taking larger orders of product than would ordinarily be the case, remember to check insurance implications and to survey the area carefully to ensure that any loading limitations on the floor/storage area are adhered to and have factored in risk to protect from environmental (cleanliness, humidity or temperature issues), stacking (adherence to storage instructions) or construction related damage.  Also pay particular attention to safety factors that may arise if product is not stacked in accordance with manufacturers instructions and H&S best practice (e.g. leaning/stacking of boards).  FIS Site Guides are free to download for members and include some helpful reminders on storage issues.

A Professional Indemnity Insurance Crisis Emerging for Construction?

A Professional Indemnity Insurance Crisis Emerging for Construction?

Since the Grenfell Tower fire, companies in the construction industry have found it increasingly difficult to secure appropriate and affordable Professional Indemnity (PI) insurance. A recent CLC survey found that average premium rates were nearly four times higher at last renewal compared to the year before, and almost a third of companies were unable to buy the cover they want or need. Over 60% of companies had some form of restriction on their cover relating to cladding or fire safety, with the result that a third were prevented from undertaking remediation work on unsafe cladding.

To help the industry, Build UK has published a guide to PI insurance which provides an overview of what it is, why it is needed, and how it can be obtained in the current market.

FIS is reviewing options and has established a working group to look at provision in the Finishes and Interiors Sector, if you want to find out more about this work, please email iainmcilwee@thefis.org of call Iain on 07792 959 481.